Consistency of valuation method upheld where long acceptance and administrative burden justify exercising judicial discretion to set aside challenge.

The principal issue was whether a long standing method of closing stock valuation, repeatedly adopted by the assessee and accepted by the Department, could be disturbed for a specific assessment year. The court declined to adjudicate the scientific correctness of the method but applied judicial discretion on factual and pragmatic grounds: prolonged acceptance, practical impossibility of rewriting multiple years' opening stock, and an undertaking by the assessee to discontinue the method prospectively. Applying these considerations, the HC set aside the Tribunal's order and allowed the appeal in favour of the assessee.

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Issues: (i) Whether the method of valuation of closing stock consistently adopted by the assessee and accepted by the Department for many years could be disturbed for assessment year 1987-88 and whether the Tribunal's order allowing the Department's appeal should be set aside.

Analysis: The Court confined its decision to the facts of the case and did not pronounce on the intrinsic merits of the valuation method. The assessee had followed the challenged valuation method for about 43 out of 45 years with the knowledge and, in many years, the acceptance of the Department. The Tribunal had applied reasoning from an earlier assessment year and allowed the Department's appeal primarily because the assessee did not produce evidence of the age of various stock items. The Court noted the practical difficulties and potential injustice that would flow from permitting a disruption of a long-accepted method (including rewriting opening stock across multiple years). The assessee filed an affidavit undertaking not to employ the disputed method from assessment year 2003-04 onwards. Taking these factual and pragmatic considerations into account, and without adjudicating the scientific correctness of the method, the Court exercised its discretion to avoid imposing an impossible administrative burden on the parties.

Conclusion: The appeal is allowed and the Tribunal's order is set aside; decision is in favour of the assessee.

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